Eyeballing the Data

Graphical representations of data along with descriptive statistics should most always be a part of the initial review and analysis of data. But most of the time, conclusions should not be based solely on a visual review of the data, but should also be supported by a test of hypothesis or other equivalent method.

Here are some notes, albeit tinged with a bit of sarcasm, on the perils of simply looking at data or simple graphics to draw conclusions. The link below is to the R Help mailing list, and a thread that discusses the IOTT (inter-ocular trauma test).

Many time series charts seem to exhibit a pattern: an up-trend, apparent periodicity, a stochastic process that seems not to be memory-less, and so on. Look at the following picture, representing stock price simulations. Do you think there is an up-trend? ﻿

A few years ago I wrote a program to add a number of common chart
patterns to price series. What amazed me was how many patterns could be
overlaid on a series, all conforming to strict rules of construction.
Not only do our eyes play tricks, but we can easily write software to
enhance those pattern finding illusions.